Can you think of a situation where they would or would not be in violation of antitrust laws?

Answer two of the following:

a) “Jerry is in line at a movie theater on a Friday night when he overhears Newman (a stranger) state: ‘The FDA has just approved Kramerica’s new painkiller, the Cosmo Pill. When the announcement is made on Monday, Kramerica stock will take off.’ What will happen if Jerry purchases stock in Kramerica before the announcement on Monday? What about if the statement had been ‘[. . .] because of the new pill, Kramerica stock will plummet’ and, as a result, Jerry dumps his stock?

b) Fifty gas stations in Greenville, North Carolina, agreed to raise the retail price of gasoline from $2.50 to $3.50 per gallon. All the gas stations’ managers printed the new price on their marquees. Are the gas stations in violation of antitrust laws? Why or why not? Can you think of a situation where they would or would not be in violation of antitrust laws?

c) Suppose that Disney insists that retailers cannot sell DVDs of their popular Community College Musical series for less than $15.00. The company threatens to cut off any retailers who discount that price. But video stores would like to use these movies as a loss leader – selling them at a very low price to lure customers. Is it legal for Disney to cut off retailers who discount prices? Why or why not? Would the stores have any recourse against Disney? Would they win? Why or why not?

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